Pension Question

CFA Level II FRA
#1

Happy Easter Everyone!

IFRS: Remeasurement gians and losses = actuarial gains and losses plus differences in actual and expected return on assets. Actuarial gains and losses only affect PBO.

GAAP: Actuarial gains and losses = IFRS definition of remeasurement gains and losses.

Aren’t these the same exact things, but just different terms?

#2

Biggest difference is how you deal with AGL between IFRS & GAAP as it pertains to Pension Expense. GAAP AGL’s get amortized via the cooridor approach while IFRS AGL indirectly impact pension expense via the net interest expense which = BEgining Funded Status x Discount rate (Funded status reflects PBO which includes AGL)